When UPS received its federal certification to operate the first drone airline in the U.S. last week, the move ushered in a “new era of parcel logistics,” GlobalData proclaimed.
According to Mike Vousden, automotive analyst for the London-based data and analytics company, UPS’ newly minted drone operations offer important clues as to how America’s most-used package delivery firm “will provide coverage on critical ‘last mile’ of parcel delivery—the distance between the delivery van or local hub, and the front door of the intended recipient.”
Powered by rapid e-commerce growth and consumer demand for fulfillment times measured by the hour instead of the days, the global last-mile market is set to top $55 billion by 2025, according to data released by MarketersMedia earlier this year. And central to maximizing margins while meeting customer expectations, is the burden of managing the steep cost of ferrying packages right to their doorstep destination.
That’s why drones offer a tantalizing alternative to gas-guzzling four-wheeled vehicles. As the world’s largest parcel delivery provider, UPS executed 5.2 billion deliveries last year, and to its credit operates the biggest fleet of vehicles powered by alternative fuel sources, Vousden pointed out.
“That means that any efficiency gain, even those measured in fractions of a percent, could significantly reduce UPS’ fuel costs and delivery times,” he said.
Electric drones that can fulfill packages quickly, cheaply and free of many of the hazards related to vehicles driven by humans, represent just one of the ways UPS is innovating in logistics.
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“The drone fleet is launching at a time when UPS is exploring a range of options to make deliveries more efficient and environmentally friendly,” Vousden said, explaining that UPS signed a commitment 18 months ago to purchase 1,000 electric vehicles designed collaboratively with Workhorse, a Cincinnati-based manufacturer of electric delivery and utility vehicles.
“For its part, Workhorse has also been developing its Horsefly autonomous drone delivery system that’s physically built into the roofs of delivery trucks,” Vousden explained, “making it an ideal complementary technology to UPS’ drone fleet.”
Amazon, of course, is the logistics upstart nipping at the heels of UPS and also FedEx, which cut ties with the multi-hyphenate innovator earlier this year amid increasingly blurred competitive lines. “UPS will be keenly aware of Amazon’s commitment in September to purchase 100,000 electric vans from electric vehicle startup Rivian,” Vousden noted.
UPS’ scramble to modernize its fleet “comes as a response to the rapidly changing face of logistics, as consumers increasingly choose e-commerce and home deliveries over traditional shopping experiences,” he added.
In crunching the numbers, GlobalData expects the global revenue from the civilian drone market to quadruple to $20 billion in 2028 from its $5 billion size last year, “driven by increased use of services such as UPS’ drone delivery fleet,” Vousden said, but also by people pursuing leisure activities, like aerial photography and drone racing.